8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC   20549 

FORM 8-K/A 

AMENDMENT NO. 1 

CURRENT REPORT 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 1, 2013

Superior Uniform Group, Inc.

(Exact name of registrant as specified in its charter)

Florida	001-05869	11-1385670
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
10055 Seminole Blvd., Seminole, Florida		33772

Registrant's telephone number including area code: (727) 397-9611

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

As previously reported, on July 1, 2013, Superior Uniform Group, Inc. (the “Company”) acquired substantially all of the assets of HPI Direct, Inc. (“HPI “). The transaction also included the acquisition of the corporate offices and warehouse distribution facility from an entity related to HPI. This Amendment No. 1 to Current Report on Form 8-K/A (the “Form 8-K/A”) amends and supplements the Current Report on 8-K filed by the Company with the Securities and Exchange Commission on July 1, 2013 (the “Original Report”) to include consolidated financial statements of HPI and TAA Investments LLC (“TAA”) and the pro forma financial information required by Items 9.01(a) and 9.01(b), respectively, and to include the exhibits under Item 9.01(d) of this Form 8-K/A.

Item 9.01     Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The audited consolidated financial statements of HPI and TAA as of December 31, 2012 and December 31, 2011, and the related notes thereto, are filed as Exhibit 99.1 to this Form 8-K/A and are incorporated in their entirety into this item by reference.

The unaudited consolidated balance sheet as of June 30, 2013, and the consolidated statements of comprehensive income and cash flows for the six-month periods ended June 30, 2013 and June 30, 2012, and the related notes thereto, are filed as Exhibit 99.2 to this Form 8-K/A and are incorporated in their entirety into this item by reference.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial statements, which includes the unaudited pro forma condensed combined balance sheet as of June 30, 2013 and the unaudited pro forma condensed combined statements of comprehensive income for the six-month period ended June 30, 2013 and for the year ended December 31, 2012, and the related notes thereto, are filed as Exhibit 99.3 to this Form 8-K/A and are incorporated in their entirety into this item by reference.

(c) Not Applicable.

(d) Exhibits.

Exhibit Number	Description of Exhibit
23.1	Mayer Hoffman McCann P.C. Consent

99.1 HPI Direct, Inc. and TAA Investments, LLC Audited Consolidated Statements of Comprehensive Income, Shareholders’ Equity and Cash Flows for the years ended December 31, 2012 and December 31, 2011 and Audited Consolidated Balance Sheets as of December 31, 2012 and December 31, 2011.

99.2 HPI Direct, Inc. and TAA Investments, LLC Unaudited Consolidated Statements of Comprehensive Income and Cash Flows for the six-month periods ended June 30, 2013 and June 30, 2012 and the Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012.

99.3 Unaudited Pro Forma Condensed Combined Statement of Comprehensive Income for the six-month period ended June 30, 2013 and Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2013.

2

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SUPERIOR UNIFORM GROUP, INC.
Date: September 12, 2013	By:	/s/ Andrew D. Demott, Jr.
		Andrew D. Demott, Jr.
		Executive Vice President, Chief Financial Officer and Treasurer

3

EX-23

Exhibit 23.1

Consent of Independent Auditor

We have issued our report dated September 12, 2013 accompanying the audited consolidated financial statements of HPI Direct, Inc. and TAA Investments, LLC for the years ended December 31, 2012 and 2011, included in this Current Report on Form 8-K/A. We hereby consent to the incorporation by reference of said report in the Registration Statement on Forms S-8 (File No. 333-105906, and File No. 333-188944).

/s/ Mayer Hoffman McCann P.C.

September 12, 2013

Clearwater, Florida

EX-99

Exhibit 99.1

HPI Direct, Inc. and TAA Investments LLC

Consolidated Statements of Comprehensive Income

Years Ended December 31,

	2012		2011
Net sales	$	29,960,803	$	24,298,095
Costs and expenses:
Cost of goods sold		20,845,666		16,342,797
Selling and administrative expenses		7,076,412		6,775,173
Interest expense		440,500		359,057
		28,362,578		23,477,027
Net income	$	1,598,225	$	821,068
Comprehensive income	$	1,598,225	$	821,068

See accompanying notes to Consolidated Financial Statements.

HPI Direct, Inc. and TAA Investments LLC

Consolidated Balance Sheets

December 31,

ASSETS
CURRENT ASSETS:	2012		2011
Cash and cash equivalents	$	190,324	$	96,783
Accounts receivable - trade, net		2,772,118		3,927,357
Prepaid expenses and other current assets		1,183,598		749,587
Inventories, net		8,471,072		6,321,078
TOTAL CURRENT ASSETS		12,617,112		11,094,805
PROPERTY, PLANT AND EQUIPMENT, NET		4,011,792		3,940,712
INTANGIBLE ASSETS, NET		926,406		1,074,156
GOODWILL		1,258,245		1,258,245
OTHER ASSETS		27,549		22,462
	$	18,841,104	$	17,390,380
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving Credit Agreement	$	8,460,280	$	7,924,016
Accounts payable		1,242,014		1,340,558
Customer deposits		35,852		30,132
Other current liabilities		1,695,242		1,940,423
Current portion of long-term debt		342,919		300,226
TOTAL CURRENT LIABILITIES		11,776,307		11,535,355
OTHER LONG-TERM LIABILITIES		-		561,292
LONG-TERM DEBT		2,340,344		1,868,294
COMMITMENTS AND CONTINGENCIES (NOTE 11)
SHAREHOLDERS' EQUITY:
Common stock $.001 par value - authorized 100,000 shares, issued and outstanding, 1,500 shares		2		2
Retained earnings		4,724,451		3,425,437
TOTAL SHAREHOLDERS' EQUITY		4,724,453		3,425,439
	$	18,841,104	$	17,390,380

See accompanying notes to Consolidated Financial Statements.

HPI Direct, Inc. and TAA Investments LLC

Consolidated Statements of Shareholders’ Equity

Years Ended December 31,

								Total
	Common		Common		Retained			Shareholders’
	Shares		Stock		Earnings			Equity
Balance, January 1, 2011		1,500	$	2	$	2,865,869		$	2,865,871
Shareholder Distributions						(261,500	)		(261,500	)
Comprehensive income						821,068			821,068
Balance, December 31, 2011		1,500		2		3,425,437			3,425,439
Shareholder Distributions						(299,211	)		(299,211	)
Comprehensive Income						1,598,225			1,598,225
Balance, December 31, 2012		1,500	$	2	$	4,724,451		$	4,724,453

 

See accompanying notes to Consolidated Financial Statements.

HPI Direct , Inc. and TAA Investments LLC

Consolidated Statements of Cash Flows

Years Ended December 31,

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,598,225		$	821,068
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization		356,966			344,937
Provision for bad debts - accounts receivable		36,777			63,000
Changes in assets and liabilities, net of acquisition of businesses:
Accounts receivable - trade		1,118,462			(2,103,018	)
Inventories		(2,149,994	)		(1,202,952	)
Prepaid expenses and other current assets		(434,011	)		(45,890	)
Other assets		(5,087	)		2,444
Accounts payable		(98,544	)		458,014
Customer deposits		5,720			(46,527	)
Other current liabilities		236,464			244,640
Net cash flows provided from (used in) operating activities		664,978			(1,464,284	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(280,296	)		(116,364	)
Acquisition of businesses		-			(1,114,000	)
Payments of contingent consideration related to business acquisitions		(1,042,937	)		(636,718	)
Net cash used in investing activities		(1,323,233	)		(1,867,082	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		850,000			-
Repayment of long-term debt		(335,257	)		(292,471	)
Net proceeds from revolving credit agreement		536,264			3,773,855
Distributions to shareholders		(299,211	)		(261,500	)
Net cash provided by financing activities		751,796			3,219,884
Net increase (decrease) in cash and cash equivalents		93,541			(111,482	)
Cash and cash equivalents balance, beginning of year		96,783			208,265
Cash and cash equivalents balance, end of year	$	190,324		$	96,783

See accompanying notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

Years Ended December 31, 2012 and 2011

NOTE 1 – Summary of Significant Accounting Policies:

a) Business description

HPI Direct, Inc. (“HPI”) manufactures and sells a wide range of uniforms, image apparel and accessories, primarily in domestic markets. HPI has a variable interest in TAA Investments, LLC (“TAA”), which owns the facility that houses HPI’s corporate offices and distribution facility. TAA is also affiliated with the company through common ownership.

b) Basis of presentation

The consolidated financial statements include the accounts of HPI and TAA, as HPI has determined it is the primary beneficiary. These entities are referred to collectively as the “Company”. All significant intercompany transactions have been eliminated.

c) Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents.

d) Revenue recognition and allowance for doubtful accounts

The Company recognizes revenue as products are shipped and title passes to the customer. The Company collects sales tax for various taxing authorities. It is the Company’s policy to record these amounts on a net basis. Therefore, these amounts are not included in net sales for the Company. A provision for estimated returns and allowances is recorded based upon historical experience and current allowance programs. Judgments and estimates are used in determining the collectability of accounts receivable. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. Charge-offs of accounts receivable are made once all collection efforts have been exhausted. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

e) Cost of goods sold and shipping and handling fees and costs  

Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing and receiving costs, inspection costs, and warehousing costs. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses and totaled $1,658,033 and $1,527,551 for the years ended December 31, 2012 and 2011, respectively.

f) Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

g) Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major renewals and improvements are capitalized, while replacements, maintenance and repairs which do not improve or extend the life of the respective assets are expensed currently. Costs of assets sold or retired and the related accumulated depreciation and amortization are eliminated from accounts and the net gain or loss is reflected in the consolidated statement of comprehensive income within selling and administrative expenses.

h) Other intangible assets

Other intangible assets consist of customer relationships acquired in previous business acquisitions.

The breakdown of intangible assets as of December 31, 2012 and 2011 was as follows:

				Estimated
	Customer Relationships			Useful Life
December 31, 2012
Cost	$	1,182,000			8 years
Accumulated amortization		(255,594	)
Net	$	926,406
December 31, 2011
Cost	$	1,182,000			8 years
Accumulated amortization		(107,844	)
Net	$	1,074,156

Amortization expense for other intangible assets was $147,750 and $107,844 for the years ended December 31, 2012 and 2011, respectively. Amortization expense for other intangible assets is expected to be $147,750 for each of the years ending December 31, 2013, 2014, 2015, 2016 and 2017; and $187,656 thereafter.

i) Goodwill

The Company assesses the recoverability of its goodwill as of December 31 of each year, or more frequently whenever events or changes in circumstances indicate that the asset might be impaired.

j) Depreciation and amortization

Plant and equipment are depreciated on the straight-line basis at 2.5% for buildings, 2.5% to 20% for improvements, 10% to 33.33% for machinery, equipment and fixtures and 20% to 33.33% for transportation equipment. Leasehold improvements are amortized over the terms of the leases inasmuch as such improvements have useful lives of at least the terms of the respective leases.

k) Taxes on income

HPI, with the consent of its shareholders, has elected to be taxed as an S corporation. Under this election, the officers and shareholders of HPI are taxed individually on their proportionate share of the Company's annual income. TAA is a limited liability company. Under this structure, the shareholders of TAA are taxed individually on their proportionate share of the Company's annual income. Therefore, no provision or liability for income taxes has been included in the consolidated financial statements of the Company.

l) Impairment of long-lived assets

Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value.

m) Comprehensive income

Other comprehensive income is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends). The Company has no items to be included in other comprehensive income for the years ended December 31, 2012 or 2011.

n) Operating segments

FASB establishes standards for the way that public companies report information about operating segments in annual financial statements and establishes standards for related disclosures about product and services, geographic areas and major customers. The Company has reviewed the standard and determined that it operates in one segment.

o)  Risks and concentrations  

Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts.  The Company manages this risk by maintaining all deposits in high quality financial institutions and periodically performing evaluations of the relative credit standing of the financial institutions. When assessing credit risk the Company considers whether the credit risk exists at both the individual and group level. Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk. At December 31, 2012 the Company had one customer with an accounts receivable balance greater than 10% of the total accounts receivable. This customer owed approximately $308,000 or approximately 10% of the total accounts receivable balance. At December 31, 2011 the Company had no customers with an accounts receivable balance greater than 10% of the total accounts receivable. The Company did not have any customers in excess of 10% of net sales for the years ended December 31, 2012 or 2011, respectively.

p) Fair value of financial instruments

The carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value as of December 31, 2012 and 2011, because of the relatively short maturities of these instruments. The carrying value of revolving credit and long-term debt approximates fair value due to market interest rates.

q) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The most significant estimates included in the financial statements relate to the determination of fair values of assets acquired and liabilities assumed, potential impairment of goodwill and other long-term assets, allowance for doubtful accounts, sales returns and allowances, potential inventory obsolescence and useful lives of long-term assets.

r) Recent Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”).  ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements.  It eliminates the option to present components of other comprehensive income as part of the changes in stockholders’ equity.  The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.  ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted.  The adoption of ASU 2011-05 only impacts presentation and did not have any effect on the Company’s consolidated financial statements or on its financial condition.

In December 2011, the FASB issued Accounting Standards Update No. 2011-12: Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”). The Update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. As part of this update, the FASB did not defer the requirement to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements. ASU 2011-12 is effective for annual periods beginning after December 15, 2012.

NOTE 2 - Allowance for Doubtful Accounts Receivable:

The activity in the allowance for doubtful accounts receivable was as follows:

	2012			2011
Balance at the beginning of year	$	97,636		$	81,487
Provision for bad debts		36,777			63,000
Charge-offs		(9,413	)		(46,851	)
Balance at the end of year	$	125,000		$	97,636

NOTE 3 - Reserve for Sales Returns and Allowances: 

The activity in the reserve for sales returns and allowances was as follows:

	2012			2011
Balance at the beginning of year	$	38,000		$	26,000
Provision for returns and allowances		54,000			38,000
Actual returns and allowances paid to customers		(38,000	)		(26,000	)
Balance at the end of year	$	54,000		$	38,000

NOTE 4 - Inventories:

	December 31,
	2012		2011
Finished goods	$	7,548,387	$	5,834,135
Raw materials		922,685		486,943
	$	8,471,072	$	6,321,078

NOTE 5 - Property, Plant and Equipment:

	December 31,
	2012			2011
Land	$	521,408		$	521,408
Buildings, improvements and leaseholds		3,731,693			3,731,693
Machinery, equipment and fixtures		2,199,193			1,918,900
		6,452,294			6,172,001
Accumulated depreciation		(2,440,502	)		(2,231,289	)
	$	4,011,792		$	3,940,712

Depreciation charges were approximately $209,216 and $237,091 in 2012 and 2011, respectively.

NOTE 6 – Revolving Credit Agreement:

	December 31,
	2012		2011
Note payable to Bank of North Georgia pursuant to revolving credit agreement, maturing April 1, 2014	$	8,460,280	$	7,924,016

The Company entered into a credit agreement with Bank of North Georgia that made available to the Company up to $11,000,000 on a revolving credit basis. Interest is payable at Prime plus 1.0% (4.25% at December 31, 2012). The revolving credit agreement expires on April 1, 2014 and is secured by all of the Company’s assets.   

The Company also entered into a line of credit agreement with the Bank of North Georgia that made available to the Company up to $500,000. Interest is payable at prime plus 2.5% with a floor of 6%. There was no balance outstanding on this agreement at December 31, 2012 or 2011.

The Company is in full compliance with all terms, conditions and covenants of the credit agreement. The outstanding balance under these agreements was paid in full on July 1, 2013.

NOTE 7 – Long-Term Debt:

	December 31,
	2012		2011
First mortgage payable to Bank of North Georgia pursuant to revolving credit agreement, maturing December 20, 2017	$	1,868,294	$	2,168,520
Second mortgage payable to Bank of North Georgia pursuant to revolving credit agreement, maturing February 28, 2017		814,969		-
		2,683,263		2,168,520
Less current maturities of long-term debt		342,919		300,226
	$	2,340,344	$	1,868,294

In 2007, the Company entered into a first mortgage agreement with Bank of North Georgia secured by the Company’s corporate office and distribution facility. Interest is payable at LIBOR plus 2.5% (2.75% at December 31, 2012).

In 2012, the Company entered into a second mortgage agreement with Bank of North Georgia secured by the Company’s corporate office and distribution facility. Interest is payable at 4.25%.

The Company is in full compliance with all terms, conditions and covenants of the credit agreements. The outstanding balance under these agreements was paid in full on July 1, 2013.

NOTE 8 – Shareholder Agreements:

The Company has entered into agreements with officer-owners under which, in the event an individual desires to sell, exchange, give or pledge, his or her Company shares, or upon death of the individual, the Company has the option to reacquire all or a part of his or her stock. The purchase price is determined by the agreement and is payable as the parties may determine.

NOTE 9 – Benefit Plans:

Defined Contribution Plan

The Company provides a defined contribution plan covering qualified employees. The plan includes a provision that allows employees to make pre-tax contributions under Section 401(k) of the Internal Revenue Code. The plan provides for the Company to make discretionary matching contribution to the plan. The Company made no contributions for the years ended December 31, 2012 and 2011.

NOTE 10 – Rentals:

Aggregate rent expense, including month-to-month rentals, approximated $21,350 and $10,675 for the years ended December 31, 2012 and 2011, respectively. The Company has no long-term lease commitments.

NOTE 11 – Contingencies:

The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters will not have a material impact on the Company’s results of operations, cash flows, or financial position.

NOTE 12 – Acquisitions

On February 28, 2011, the Company acquired substantially all of the assets of Storreytime, LLC. (“Storreytime”), a privately owned company specializing in the design, manufacture and distribution of uniforms to domestic retailers, foodservice chains, and other service industries throughout the United States. The purchase price for the asset acquisition consisted of approximately $664,000 in cash and additional contingent consideration through February 2013 and is allocated as follows:

Inventories	$	460,000
Vendor Deposits		64,000
Customer Related Intangibles		693,000
Goodwill		768,009
Total assets	$	1,985,009
Future contingent liabilities	$	1,321,009

 

Revenues and expenses of Storreytime are included in the consolidated financial statements beginning March 1, 2011.

The Company expensed approximately $260,000 in transaction costs associated with this transaction during the year ended December 31, 2011.  These amounts are included in selling and administrative expenses in the consolidated statement of comprehensive income for the year ended December 31, 2011.

As of December 31, 2012 and 2011 the contingent payable balance outstanding was $17,123 and $802,784, respectively. These amounts are included in other current liabilities and other long-term liabilities on the consolidated balance sheets.

On June 30, 2011, the Company acquired substantially all of the assets of BEG, LLC (“BEG”), a privately owned company specializing in the design, manufacture and distribution of uniforms to domestic retailers, foodservice chains, and other service industries throughout the United States. The purchase price for the asset acquisition consisted of approximately $450,000 in cash and additional contingent consideration through July 2013 and is allocated as follows:

Inventories	$	350,702
Equipment		40,000
Customer Related Intangibles		489,000
Goodwill		490,236
Total assets	$	1,369,938
Future contingent liabilities	$	919,938

Revenues and expenses of BEG are included in the consolidated financial statements beginning July 1, 2011.

The company expensed approximately $168,000 in transaction costs associated with this transaction during the year ended December 31, 2011.  These amounts are included in selling and administrative expenses in the consolidated statement of comprehensive income for the year ended December 31, 2011.

As of December 31, 2012 and 2011 the contingent payable balance outstanding was $544,169 and $801,445, respectively. These amounts are included in other current liabilities and other long-term liabilities on the consolidated balance sheets. In July 2013, the Company and BEG settled all contingent consideration related to this transaction.

NOTE 13 – Due To Shareholders:

As of December 31, 2012 and 2011, the Company had outstanding balances payable to its shareholders for $372,950 and$409,088, respectively. There are no fixed repayment terms for these obligations. These amounts are included in other current liabilities on the consolidated balance sheets.

NOTE 14 – Supplemental Cash Flow Information:

	Year Ended December 31,
	2012		2011
Interest paid	$	431,355	$	329,413

 

NOTE 15 – Subsequent Events:

Management has evaluated events and transactions for potential recognition or disclosure through September 12, 2013, the date which these consolidated financial statements were available for issuance.

On July 1, 2013, the Company sold substantially all of its assets to Superior Uniform Group, Inc.

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of

Superior Uniform Group, Inc.

We have audited the accompanying consolidated financial statements of HPI Direct, Inc. and TAA Investments, LLC (collectively the Company), which comprise the consolidated balance sheets as of December 31, 2012 and 2011, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Mayer Hoffman McCann, P.C.

September 12, 2013

Clearwater, Florida

EX-99

Exhibit 99.2

HPI DIRECT, INC. AND TAA INVESTMENTS LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

SIX MONTHS ENDED JUNE 30,

(Unaudited)

	2013		2012
Net sales	$	17,342,138	$	14,215,280
Costs and expenses:
Cost of goods sold		11,759,123		9,917,274
Selling and administrative expenses		4,349,243		3,396,196
Interest expense		257,243		231,295
		16,365,609		13,544,765
Net income	$	976,529	$	670,515
Comprehensive income	$	976,529	$	670,515

See accompanying notes to Consolidated Interim Financial Statements.

HPI DIRECT, INC. AND TAA INVESTMENTS LLC

CONSOLIDATED BALANCE SHEETS

	June 30,
	2013		December 31,
	(Unaudited)		2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	290,178	$	190,324
Accounts receivable - trade, net		4,611,642		2,772,118
Prepaid expenses and other current assets		1,074,830		1,183,598
Inventories, net		10,313,490		8,471,072
TOTAL CURRENT ASSETS		16,290,140		12,617,112
PROPERTY, PLANT AND EQUIPMENT, NET		3,928,105		4,011,792
INTANGIBLE ASSETS, NET		852,532		926,406
GOODWILL		1,258,245		1,258,245
OTHER ASSETS		26,817		27,549
	$	22,355,839	$	18,841,104
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving Credit Agreement	$	9,757,866	$	8,460,280
Accounts payable		1,050,077		1,242,014
Customer deposits		2,003,630		35,852
Other current liabilities		1,862,766		1,695,242
Current portion of long-term debt		344,796		342,919
TOTAL CURRENT LIABILITIES		15,019,135		11,776,307
LONG-TERM DEBT		2,163,527		2,340,344
COMMITMENTS AND CONTINGENCIES (NOTE 5)
SHAREHOLDERS' EQUITY:
Common stock $.001 par value - authorized 100,000 shares, issued and outstanding, 1,500 shares		2		2
Retained earnings		5,173,175		4,724,451
TOTAL SHAREHOLDERS' EQUITY		5,173,177		4,724,453
	$	22,355,839	$	18,841,104

 See accompanying notes to Consolidated Interim Financial Statements.

HPI DIRECT, INC. AND TAA INVESTMENTS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,
(Unaudited)

	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	976,529		$	670,515
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		272,561			198,946
Provision for bad debts - accounts receivable		104,595			67,000
Changes in assets and liabilities, net of acquisition of businesses:
Accounts receivable - trade		(1,944,119	)		566,681
Inventories		(1,842,418	)		1,059,560
Prepaid expenses and other current assets		108,768			(94,485	)
Other assets		732			(7,778	)
Accounts payable		(191,937	)		(247,710	)
Customer deposits		1,967,778			(29,816	)
Other current liabilities		402,401			(264,886	)
Net cash flows (used in) provided by operating activities		(145,110	)		1,933,583
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(115,000	)		(110,362	)
Payments of contingent consideration related to business acquisitions		(234,877	)		(551,591	)
Net cash used in investing activities		(349,877	)		(661,953	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		-			850,000
Repayment of long-term debt		(174,940	)		(164,125	)
Revolving credit agreement		1,297,586			(1,768,917	)
Distribution to shareholders		(527,805	)		-
Net cash provided by (used in) financing activities		594,841			(1,083,042	)
Net increase in cash and cash equivalents		99,854			188,588
Cash and cash equivalents balance, beginning of year		190,324			96,783
Cash and cash equivalents balance, end of period	$	290,178		$	285,371

See accompanying notes to Consolidated Interim Financial Statements.

         HPI DIRECT, INC. AND TAA INVESTMENTS, LLC

NOTES TO CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Unaudited)

NOTE 1 – Summary of Significant Interim Accounting Policies:

a)    Basis of presentation

The consolidated interim financial statements include the accounts of HPI Direct, Inc. (“HPI”) and TAA Investments, LLC (“TAA”). HPI has a variable interest in TAA, which owns the facility that houses HPI’s corporate offices and distribution facility. TAA is also affiliated with HPI through common ownership. HPI has determined it is the primary beneficiary. These entities are referred to collectively as “the Company”. All significant intercompany transactions have been eliminated. The accompanying unaudited consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s consolidated financial statements for the year ended December 31, 2012. The interim financial information contained herein is not certified or audited; it reflects all adjustments (consisting of only normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the operating results for the periods presented, stated on a basis consistent with that of the audited financial statements. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

b)    Revenue recognition

The Company records revenue as products are shipped and title passes to the customer. A provision for estimated returns and allowances is recorded based on historical experience and current allowance programs.

c)    Recognition of costs and expenses

Costs and expenses other than product costs are charged to income in interim periods as incurred, or allocated among interim periods based on an estimate of time expired, benefit received or activity associated with the periods. Procedures adopted for assigning specific cost and expense items to an interim period are consistent with the basis followed by the Company in reporting results of operations at annual reporting dates. However, when a specific cost or expense item charged to expense for annual reporting purposes benefits more than one interim period, the cost or expense item is allocated to the interim periods.

d)    Amortization of other intangible assets

The Company amortizes identifiable intangible assets on a straight line basis over their expected useful lives. Amortization expense for other intangible assets was $73,875 for the six-month periods ended June 30, 2013 and 2012 respectively.

e)    Shipping and handling fees and costs

The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with in-bound and out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs such as labor and overhead are included in selling and administrative expenses and totaled $1,268,881 and $861,093 for the six months ended June 30, 2013 and 2012, respectively.

f)      Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

g) Taxes on income

HPI, with the consent of its shareholders, has elected to be taxed as an S corporation. Under this election, the officers and shareholders of HPI are taxed individually on their proportionate share of the Company's annual income. TAA is a limited liability company. Under this structure, the shareholders of TAA are taxed individually on their proportionate share of the Company's annual income. Therefore, no provision or liability for income taxes has been included in the combined financial statements of the Company.

h) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The most significant estimates included in the financial statements relate to the determination of fair values of assets acquired and liabilities assumed, potential impairment of goodwill and other long-term assets, allowance for doubtful accounts, sales returns and allowances, potential inventory obsolescence and useful lives of long-term assets.

i)     Comprehensive income

Other comprehensive income (loss) is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends). The Company has no items to be included in other comprehensive income for the six-month periods ended June 30, 2013 or 2012.

j)     Operating segments

FASB establishes standards for the way that public companies report information about operating segments in annual financial statements and establishes standards for related disclosures about product and services, geographic areas and major customers. The Company has reviewed the standard and determined that it operates in one segment.

k)     Risks and concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts.  The Company manages this risk by maintaining all deposits in high quality financial institutions and periodically performing evaluations of the relative credit standing of the financial institutions. When assessing credit risk the Company considers whether the credit risk exists at both the individual and group level. Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk. At June 30, 2013, the Company had one customer with an accounts receivable balance greater than 10% of the total accounts receivable. This customer owed approximately $1,472,000 or approximately 31% of the total accounts receivable balance. At December 31, 2012, the Company had one customer with an accounts receivable balance greater than 10% of the total accounts receivable. This customer owed approximately $308,000 or approximately 10% of the total accounts receivable balance. The Company did not have any sales concentrations in excess of 10% for the periods ended June 30, 2013 and 2012, respectively.

NOTE 2 – Revolving Credit Agreement:

	June 30,		December 31,
	2013		2012
Note payable to Bank of North Georgia pursuant to revolving credit agreement, maturing April 1, 2014	$	9,757,866	$	8,460,280

The Company entered into a credit agreement with Bank of North Georgia that made available to the Company up to $11,000,000 on a revolving credit basis. Interest is payable at Prime plus 1.0% (4.25% at June 30, 2013). The agreement is secured by all of the Company’s assets.

The Company also entered into a line of credit agreement with the Bank of North Georgia that made available to the Company up to $500,000. Interest is payable at prime plus 2.5% with a floor of 6%. There was no balance outstanding on this agreement at June 30, 2013 or December 31, 2012.

The Company is in full compliance with all terms, conditions and covenants of the credit agreement. The outstanding balance under those agreements was paid in full on July 1, 2013.

NOTE 3 – Long-Term Debt:

	June 30,		December 31,
	2013		2012
First mortgage payable to Bank of North Georgia pursuant to revolving credit agreement, maturing December 20, 2017	$	1,714,522	$	1,868,294
Second mortgage payable to Bank of North Georgia pursuant to revolving credit agreement, maturing February 28, 2017		793,801		814,969
		2,508,323		2,683,263
Less current maturities of long-term debt		344,796		342,919
	$	2,163,527		2,340,344

In 2007, the Company entered into a first mortgage agreement with Bank of North Georgia secured by the Company’s corporate office and distribution facility. Interest is payable at LIBOR plus 2.5% (2.75% at June 30, 2013). This agreement is secured by all of the Company’s assets.

In 2012, the Company entered into a second mortgage agreement with Bank of North Georgia secured by the Company’s corporate office and distribution facility. Interest is payable at 4.25%.                                                   

The Company is in full compliance with all terms, conditions and covenants of the credit agreements. The outstanding balance under those agreements was paid in full on July 1, 2013.

NOTE 4 – Supplemental Cash Flow Information:

Cash paid for interest was $257,243 and $258,493, respectively, for the six-month periods ended June 30, 2013 and 2012.

NOTE 5 – Contingencies:

The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters will not have a material impact on the Company’s results of operations, cash flows, or financial position.          

NOTE 6 – Due To Shareholders:

As of June 30, 2013 and December 31, 2012, the Company had outstanding balances payable to its shareholders for $343,978 and $372,950, respectively. There are no fixed repayment terms for these obligations. These amounts are included in other current liabilities on the consolidated balance sheets.

NOTE 7 – Subsequent Events:

Management has evaluated events and transactions for potential recognition or disclosure through September 12, 2013, the date which these consolidated financial statements were available for issuance.

On July 1, 2013, the Company sold substantially all of its assets to Superior Uniform Group, Inc.

EX-99

Exhibit 99.3

INTRODUCTION TO

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On July 1, 2013, the Superior Uniform Group, Inc. (“the Company”) acquired substantially all of the assets of HPI Direct, Inc. (“HPI”). The purchase price for the asset acquisition consists of approximately $32.5 million in cash, subject to adjustment and inclusive of the real estate purchase described below, the issuance of approximately 209,000 restricted shares of the Company’s common stock, the potential future payment of up to $7.2 million in additional contingent consideration through 2017, and the assumption of certain liabilities of HPI. The transaction also includes the acquisition of the corporate offices and warehouse distribution facility from TAA Investments LLC. (“TAA”), an entity related to HPI. Concurrent with the closing of the acquisition, Superior renewed its $15 million revolver agreement and entered into a new term loan for $30 million. Both credit facilities carry five year terms and variable interest rate of LIBOR plus 0.95%.

The following unaudited pro forma combined balance sheet as of June 30, 2013 combines the historical balance sheet of the Company as of June 30, 2013, as filed with the Securities and Exchange Commission (“SEC”) in its report on Form 10-Q, with the historical consolidated balance sheet of HPI and TAA as of June 30, 2013, giving effect to the acquisition as if it had occurred on June 30, 2013. The unaudited pro forma condensed combined statements of comprehensive income for the six-month period ended June 30, 2013 and for the year ended December 31, 2012 combine the historical consolidated statements of comprehensive income of the Company for the six-month period ended June 30, 2013 and for the year ended December 31, 2012, as filed with the SEC in its quarterly report on Form 10-Q and annual report on Form 10-K, with the historical consolidated statements of comprehensive income of HPI and TAA for the six-month period ended June 30, 2013 and for the year ended December 31, 2012, giving effect to the acquisition as though it had occurred at the beginning of the period presented, using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements.

The acquisition has been accounted for under the purchase method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets of HPI and TAA acquired in connection with the acquisition, based on their estimated fair values. Management has made a preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. The allocation of the purchase price is preliminary pending finalization of various estimates and valuation analyses.

The unaudited pro forma condensed combined financial statements have been prepared by management for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had the Company and HPI and TAA been a consolidated company during the specified periods. The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document. The unaudited pro forma combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements of the Company included in its Annual Report on Form 10- K for the year ended December 31, 2012. In addition, the unaudited pro forma combined financial statements, including the notes thereto, are based on the historical consolidated financial statements of HPI and TAA for the six-month period ended June 30, 2013 and year ended December 31, 2012, which are included in Exhibit 99.1 to this Form 8-K/A.

Pro forma adjustments are necessary to reflect the purchase price and purchase accounting adjustments based on preliminary estimates of the fair values of the HPI and TAA net assets acquired. The unaudited pro forma combined financial statements do not reflect any operating efficiencies and cost savings that may be realized with respect to the consolidated companies.

Item 8. Financial Statements and Supplementary Data

Superior Uniform Group, Inc. and Subsidiaries

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF COMPREHENSIVE INCOME

Six months ended June 30, 2013

	Superior Uniform Group, Inc.		HPI Direct & TAA Investments		Pro Forma Adjustments			Note 3	Pro Forma Combined
Net sales	$	61,839,000	$	17,342,000					$	79,181,000
Costs and expenses:
Cost of goods sold		39,348,000		11,759,000						51,107,000
Selling and administrative expenses		18,659,000		4,349,000		(74,000	)	I		23,639,000
						935,000		J
						(230,000	)	K
Interest expense		15,000		257,000		(257,000	)	L		195,000
						180,000		M
		58,022,000		16,365,000		554,000				74,941,000
Income before taxes on income		3,817,000		977,000		(554,000	)			4,240,000
Income tax expense		1,150,000		-		150,000		N		1,300,000
Net income	$	2,667,000	$	977,000	$	(704,000	)		$	2,940,000
Weighted average number of shares outstanding during the period
(Basic)		6,123,752				208,617		O		6,332,369
(Diluted)		6,169,798				208,617		O		6,378,415
Per Share Data:
Basic
Net income	$	0.44	$	-					$	0.46
Diluted
Net income	$	0.43	$	-					$	0.46
Other comprehensive income, net of tax:
Defined benefit pension plans:
Amortization of prior service costs included in net periodic pension costs		4,000		-						4,000
Recognition of net losses included in net periodic pension costs		379,000		-						379,000
Recognition of settlement loss inlcuded in net periodic pension costs		161,000		-						161,000
Current period gains		1,991,000		-						1,991,000
Other comprehensive income	$	2,535,000	$	-	$	-			$	2,535,000
Comprehensive income	$	5,202,000	$	977,000	$	(704,000	)		$	5,475,000
Cash dividends per common share	$	-	$	-	$	-			$	-

See accompanying notes to Unaudited Proforma Condensed Combined Interim Financial Statements.

Superior Uniform Group, Inc. and Subsidiaries

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF COMPREHENSIVE INCOME

Year Ended December 31, 2012

	Superior Uniform Group, Inc.			HPI Direct & TAA Investments		Pro Forma Adjustments			Note 3	Pro Forma Combined
Net sales	$	119,486,000		$	29,961,000					$	149,447,000
Costs and expenses:
Cost of goods sold		79,723,000			20,846,000						100,569,000
Selling and administrative expenses		33,886,000			7,076,000		(148,000	)	I		42,684,000
							1,870,000		J
Intangible asset impairment		1,226,000			-						1,226,000
Interest expense		30,000			441,000		(441,000	)	L		390,000
							360,000		M
		114,865,000			28,363,000		1,641,000				144,869,000
Income before taxes on income		4,621,000			1,598,000		(1,641,000	)			4,578,000
Taxes on income		1,590,000			-		(10,000	)	N		1,580,000
Net income	$	3,031,000		$	1,598,000	$	(1,631,000	)		$	2,998,000
Weighted average number of shares outstanding during the period
(Basic)		6,061,691					208,617		O		6,270,308
(Diluted)		6,142,997					208,617		O		6,351,614
Per Share Data:
Basic
Net earnings	$	0.50		$	-					$	0.48
Diluted
Net earnings	$	0.49		$	-					$	0.47
Other comprehensive income (loss), net of tax:
Defined benefit pension plans:
Amortization of prior service costs included in net periodic pension costs		12,000			-						12,000
Recognition of net losses included in net periodic pension costs		(1,072,000	)		-						(1,072,000	)
Other comprehensive loss		(1,060,000	)		-						(1,060,000	)
Comprehensive income	$	1,971,000		$	1,598,000	$	(1,631,000	)		$	1,938,000
Dividends per common share	$	1.08		$	-	$	-			$	1.08

See accompanying notes to Unaudited Proforma Condensed Combined Interim Financial Statements.

Superior Uniform Group, Inc.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS

Six months ended June 30, 2013

	Superior Uniform Group, Inc.			HPI Direct & TAA Investments		Pro Forma Adjustments			Note 3	Pro Forma Combined
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,953,000		$	290,000	$	(290,000	)	A	$	8,455,000
							(2,498,000	)	B
Accounts receivable - trade, net		17,210,000			4,612,000						21,822,000
Accounts receivable - other		3,170,000			-						3,170,000
Prepaid expenses and other current assets		3,186,000			1,075,000						4,261,000
Inventories, net		39,499,000			10,313,000						49,812,000
TOTAL CURRENT ASSETS		74,018,000			16,290,000		(2,788,000	)			87,520,000
PROPERTY, PLANT AND EQUIPMENT, NET		9,050,000			3,928,000		455,000		C		13,433,000
INTANGIBLE ASSETS, NET		486,000			853,000		20,422,000		D		21,761,000
GOODWILL		-			1,258,000		979,000		E		2,237,000
DEFERRED INCOME TAXES		3,505,000			-						3,505,000
OTHER ASSETS		167,000			27,000						194,000
	$	87,226,000		$	22,356,000	$	19,068,000			$	128,650,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit agreement	$	-		$	9,758,000	$	(9,758,000	)	A	$	-
Accounts payable		6,936,000			1,050,000		(1,050,000	)	A		6,936,000
Customer deposits		-			2,004,000						2,004,000
Other current liabilities		3,708,000			1,862,000		(1,197,000	)	A		4,373,000
Current portion of long-term debt		-			345,000		(345,000	)	A		1,500,000
		-					1,500,000		F
TOTAL CURRENT LIABILITIES		10,644,000			15,019,000		(10,850,000	)			14,813,000
LONG-TERM DEBT		5,000,000			2,164,000		(2,164,000	)			33,500,000
							28,500,000		F
LONG-TERM PENSION LIABILITY		7,034,000			-						7,034,000
OTHER LONG-TERM LIABILITIES		700,000			-		7,200,000		G		7,900,000
DEFERRED INCOME TAXES		100,000			-						100,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value - authorized 300,000 shares (none issued)		-			-
Common stock, $.001 par value - authorized 50,000,000 shares, issued and outstanding - 6,131,600 and 6,115,907 shares, respectively.		6,000			-						6,000
Additional paid-in capital		22,046,000			-		1,555,000		H		23,601,000
Retained earnings		47,118,000			5,173,000		(5,173,000	)	A		47,118,000
Accumulated other comprehensive loss, net of tax:
Pensions		(5,422,000	)		-						(5,422,000	)
TOTAL SHAREHOLDERS' EQUITY		63,748,000			5,173,000		(3,618,000	)			65,303,000
	$	87,226,000		$	22,356,000	$	19,068,000			$	128,650,000

See accompanying notes to Unaudited Proforma Condensed Combined Interim Financial Statements.

SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1 – Basis of Presentation:

The unaudited pro forma condensed combined balance sheet gives effect to the acquisition, which was accounted for under the purchase method of accounting, as if it had been consummated on June 30, 2013.

The unaudited pro forma condensed combined statement of comprehensive income for the six-month period ended June 30, 2013 has been prepared to reflect the acquisition as if it occurred on January 1, 2013.

The unaudited pro forma condensed combined statement of comprehensive income for the year ended December 31, 2012 has been prepared to reflect the acquisition as if it occurred on January 1, 2012

NOTE 2 –Acquisition and Purchase Price Allocation:

On July 1, 2013, the Company acquired substantially all of the assets of HPI Direct, Inc. (“HPI”). The purchase price for the asset acquisition consists of approximately $32.5 million in cash, subject to adjustment and inclusive of the real estate purchase described below, the issuance of approximately 209,000 restricted shares of the Company’s common stock, the potential future payment of up to $7.2 million in additional contingent consideration through 2017, and the assumption of certain liabilities of HPI. The transaction also includes the acquisition of the corporate offices and warehouse distribution facility from TAA Investments LLC (“TAA), an entity related to HPI. The following table reconciles the estimated fair value of the acquired assets and assumed liabilities to the total purchase price.

Accounts Receivable	$	4,612,000
Inventories		10,313,000
Prepaid expenses and other current assets		1,075,000
Property, plant and equipment		4,383,000
Other assets		27,000
Identifiable intangible assets		21,275,000
Goodwill		2,237,000
Total assets	$	43,922,000
Other current liabilities	$	2,668,000
Total liabilities	$	2,668,000

The excess of the purchase price over the net assets has been preliminarily allocated to goodwill and intangible assets pending final valuation by an independent appraisal.

The asset purchase agreement provides HPI with the opportunity to receive additional contingent consideration through December of 2017 of up to $7,200,000. The Company estimates that the full amount of this contingent consideration will be earned by HPI.

A final determination of fair values may differ materially from the preliminary estimates and will include management’s final valuation of the fair values of assets acquired and liabilities assumed. This final valuation will be based on the actual acquired net tangible assets of HPI and TAA that existed as of the completion date of the acquisition. The final valuation may change the allocation of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed combined financial statements.

NOTE 3 –Pro Forma Adjustments:

The following is a summary of pro forma adjustments reflected in the unaudited pro forma condensed combined financial statements based on preliminary estimates, which may change as additional information is obtained.

Pro Forma Condensed Combined Balance Sheet Adjustments

A. To remove non retained assets, liabilities and equity of HPI and TAA.

B. To record cash payment at closing to HPI and TAA.

C. To adjust property, plant and equipment to fair value at date of acquisition.

D. To eliminate historical value of intangible assets and to record the estimated fair value of acquired identifiable intangible assets.

E. To eliminate historical value of goodwill and to record the estimated fair value of acquired goodwill.

F. To record term loan from Fifth Third Bank to the Company to fund the acquisition.

G. To record estimated liability for contingent consideration.

H. To record fair value of restricted stock issued as part of consideration for acquisition.

Pro Forma Statement of Comprehensive Income Adjustments

I. To eliminate historical amortization expense of intangible assets.

J. To record amortization expense on intangible assets acquired.

K. To remove transaction fees recognized in 2013 prior to closing.

L. To eliminate interest on outstanding debt of HPI and TAA that was paid off at closing.

M. To record interest on Company debt used to finance the transaction. This amount is calculated utilizing the interest rate on the full principal balance of the term loan that was in effect on the date of closing of 1.20%.

N. To record tax effect of the pro forma income and adjustments to the statement of comprehensive income.

O. To reflect increase in outstanding shares for restricted stock grant.